After Payment Transformation: The Fee-for-Service and Capitation Crossroads

HHTF Staff · 2026-05-27

Primary care payment reform is now caught between two partial solutions. One tries to improve fee-for-service by paying for work it historically ignored. The other tries to move away from fee-for-service through global budgets, ACOs, and population-based payment. Both can be useful. Both can also fail if they are built on the wrong baseline.

The failure of HMSA Payment Transformation matters because it shows what happens when a payment model assumes that existing utilization reflects real need. In a constrained system, it does not. If patients cannot get primary care appointments, if physicians have closed panels, if rural clinics are understaffed, and if Medicaid payment is too low for independent practices to participate, then past utilization is not a measure of adequate care.

It is a record of care people managed to obtain despite restricted access.

That distinction is central. You cannot define adequate future spending by looking only at what was spent in a system where care was already hard to get. You cannot safely project future need from past use if past use was suppressed by shortage, underpayment, geography, and administrative burden. Doing so turns scarcity into policy. It treats unmet need as savings.

CMS appears to be recognizing part of this problem by creating more ways to pay for the work primary care already does: chronic care management, behavioral health integration, principal illness navigation, community health integration, caregiver training, remote monitoring, advanced primary care management, and other codes that make invisible work billable. That is a correction to fee-for-service, not a defense of old fee-for-service. It acknowledges that primary care has been doing more than the payment system counted.

At the same time, federal and state policy continue to move toward AHEAD, global budgets, and other population-based models. Those models may be useful after primary care capacity is rebuilt. But if they are layered on top of an underfunded system, they risk freezing the shortage in place. A cap based on historical spending can look responsible while quietly preserving the access failures that kept spending artificially low.

Hawaiʻi is the warning case. Payment Transformation promised value, but it did not appear to build enough primary care capacity. Now the state faces a choice. It can treat the past decade as proof that we need the next model faster, or it can recognize the deeper lesson: payment reform fails when it tries to manage cost before it pays for the care patients actually need.

The point is not to choose fee-for-service forever or global payment forever. The point is sequencing. First rebuild primary care capacity. Pay for the clinicians, staff, care coordination, between-visit work, rural scope, and complex patient care that access requires. Then design global payment around a system that can actually deliver care.